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2009 (8) TMI 557

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..... 003 - Dated:- 28-8-2009 - MS. INDIRA BANERJEE J. Dr. D. Pal, Abhratosh Majumdar and Ananda Sen for the petitioner. Dipak Shome and P. K. Bhoumick for the respondents. JUDGMENT 1. Ms. IND BANERJEE J. - In this writ application, the petitioner has, inter alia, challenged a notice dated August 28, 2003, issued to the petitioner by the Assessing Officer under section 148 of the Income-tax Act, 1961, hereinafter referred to as the Income-tax Act, for reopening the assessment of the petitioner for the assessment year 1999-2000. 2. On December 28, 1999, the petitioner submitted a return of its income for the assessment year 1999-2000 under section 139 of the Income-tax Act, disclosing total income of Rs. 6,76,22,600. The petitioner later filed a revised return on March 29, 2001, disclosing an income of Rs. 3,48,84,790. 3. The reduction of income was, according to the petitioner, by reason of decrease in the value of the stock-in-trade of Rajdoot Paints Ltd, which had been amalgamated with the petitioner, upon change in the accounting method and adoption of the accepted method of valuation of stocks, followed by the petitioner. 4. The Assessing Officer did not issue any notice of inquiry i .....

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..... cause, was of the view that rectification of the assessment order was not called for. 12. However, the same officer issued the impugned notice dated August 28, 2003, under section148 of the Income-tax Act for reassessment of income for the year in question under section 147 of the said Act, and called upon the petitioner to file a revised return. The impugned notice does not disclose the reasons for the belief that income had escaped assessment. 13. By a letter dated September 26, 2003, the petitioner requested the Assessing Officer to withdraw the notice, inter alia, contending that no income of the petitioner had escaped assessment. The petitioner also called upon the Assessing Officer to furnish reasons to the petitioner for the decision to reassess income under section 147 of the Income-tax Act. 14. On September 30, 2003, the petitioner filed its revised return under protest, pursuant to the impugned notice under section 148. 15. The petitioner was later furnished with reasons for reopening assessment, which are practically the same as the reasons for the notice under section 154 of the Income-tax Act, for rectification of the alleged mistakes in the revised assessment order. .....

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..... ch of the grounds disclosed by the Assessing Officer for the impugned notice under section 148 of the Income-tax Act. 18. Dr. Debi Prasad Pal appearing on behalf of the petitioner submitted that the grounds disclosed by the respondents were misconceived, against the settled principles of law and no grounds in law for reopening assessment. 19. As pointed out by Dr. Pal, the first ground, of the difference between the unpaid excise and customs duty on the opening stock at the start of the accounting year and the closing stock at the end of the accounting year, not being deductible was also the first ground for the rectification notice dated December 24, 2002, under section 154 of the Income-tax Act, which had been dropped. Moreover, the decision of this court in CIT v. Berger Paints (India) Ltd. (No. 1)[2002] 254 ITR 498 on which this ground is based, has been reversed by the Supreme Court in Berger Paints (India) Ltd. v. CIT reported in [2004] 266 ITR 99. 20. Dr. Pal rightly argued that the second ground disclosed for issuance of the impugned notice is the same as the fourth ground disclosed in the rectification notice under section 154 of the Income-tax Act, which had been dropped .....

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..... er is arbitrary as he has not stated the reason for rejection of the assessee s method, he has not stated how he arrived at 20 per cent. for allocating common head office expenses which shows he has taken an ad hoc figure and we accept that profit ratio cannot be applied consistently in all years. Moreover, in addition to the audited accounts of the company, the assessee maintains separate accounts for the Pondicherry unit to ascertain its profit and which again is certified by the auditors. The same should be accepted. We are in agreement with the contention of the learned authorised representative which is supported by the decisions of the hon ble Supreme Court as stated above that once the Department has accepted a decision on a particular issue by not challenging the same before any higher forum it is not open for it to contend in the contrary on the same issue in a later year. We would reiterate that in the present case the Department has accepted the basis of allocation of common head office and selling expenses in the assessment year 1998-99 and there is no dispute as to the fact that the same basis has been adopted by the assessee in the assessment year 2000-01 which are be .....

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..... by the petitioner in its reply to the impugned notice. Dr. Pal pointed out that the categorical assertion of the petitioner that it had claimed deduction of only net income in convertible exchange, computed by exclusion of expenses in accordance with the decision of this court in CIT v. M. N. Dastur and Co. P. Ltd. reported in [2000] 243 ITR 10 (Cal) had not been dealt with by the Assessing Officer. 32. The Assessing Officer had issued the intimation dated November 20, 2001, under section 143(1) of the Income-tax Act and the revised intimation dated March 27, 2002, under the same section, accepting that Rs.194.6 lakhs deducted towards sales tax in the profit and loss account, had not been realized from customers and there was no excess debit. 33. The petitioner, in dealing with the fifth reason for reopening assessment, made a categorical assertion that sales tax realized from customers was neither credited nor debited in the profit and loss account. Nor was any deduction claimed in respect of the same. 34. The petitioner was, apparently liable to turnover tax, under the sales tax laws, based on its aggregate turnover during the financial year. Turnover tax is not recoverable from .....

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..... e is a mistake, apparent from the record as it exists, committed in the order of assessment, which is rectifiable on the basis of the existing record under section 154 being a special provision made for the purpose, and that there is no need to resort to reopening of the assessment as contemplated by section 148 read with section 147 of the Act, then he must resort to the provision and cannot wantonly or arbitrarily and without valid reason resort to reopening of the assessment… The function of the Assessing Officer acting under section 147 is not limited, as under section 154, merely to rectifying the result which may have been vitiated due to mistake apparent from the record. It would, therefore, follow that in cases of mistake resulting in escapement, which is the area where both the provisions would become relevant, the Assessing Officer will have to consider whether he was required by the nature of escapement to reconsider the question of how he would ascertain and assess income that has escaped assessment and reopen the assessment or if that is not required then merely to rectify the mistaken result on the basis of the existing record. If he chooses to resort to the former, i .....

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..... 42. However, if the Assessing Officer is of the view that income has escaped assessment by reason of a mistake apparent from records, and takes recourse to section 154, but finds later, that there is no apparent mistake, then he cannot, in the absence of any other ground on the basis of which he still has reason to believe that the income has escaped assessment, start reassessment proceedings under section 147 of the Act. In other words, the Assessing Officer cannot again start reassessment proceedings on the basis of the same reasons. 43. The Assessing Officer has not disclosed the reasons for the Assessing Officer to still believe that income that was the subject-matter of rectification had still escaped assessment though that was not due to any obvious mistake, borne out from existing records. 44. The judgment in GKN Driveshafts (India) Ltd. v. ITO reported in [2003] 259 ITR 19, cited by Mr. Bhowmik was rendered by the Supreme Court in the particular facts of that case. The Supreme Court held (page 20): We see no justifiable reason to interfere with the order under challenge. However, we clarify that when a notice under section 148 of the Income-tax Act is issued, the proper co .....

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..... and kept pending for about six years and directions issued for filing of affidavits, this court is not inclined to decline relief only on the ground of existence of an alternative remedy of fifing an objection before the Assessing Officer and then taking recourse to an appeal upon reassessment. 49. In Raymond Woollen Mills Ltd. v. ITO reported in [1999] 236 ITR 34 (SC) cited by Mr. Bhowmick, the Supreme Court was satisfied on facts that jurisdiction to reassess had validly been assumed. If there are reasons to believe that income has escaped assessment, and jurisdiction to issue notice of reassessment under section 143 of the Income-tax Act has been exercised, the court ought not to weigh the sufficiency of the reasons in exercise of its extraordinary writ jurisdiction under article 226 of the Constitution of India. 51. The court may, however, in exercise of its power of judicial review examine whether the conditions precedent for exercise of jurisdiction to reopen assessment at all exist. In the absence of any new and/or fresh materials, on the basis of which the Assessing Officer could have formed the opinion that income has escaped assessment, the Assessing Officer lacked juris .....

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